Question

Pratte Boat Wash's cost formula for its cleaning equipment and supplies is $2.460 per month plus $49 per boat. For the month of April, the company planned for activity of 58 boats, but the actual level of activity was 18 boats. The actual cleaning equipment and supplies for the month was $3.470. The spending variance for cleaning equipment and supplies in April would be closest to:
Multiple Choice

a. $1,832 U
b. $128 U
c. $1,832 F

Answer 1

Answer:

C. $1,832 F

Explanation:

The spending variance for equipment and supplies can be calculated as below:

Spending variance = Actual spending - Standard Spending

                                =  Actual cleaning equipment and supplies -  (Planned boat activity x Cost per boat activity + Fixed planned cleaning equipment and supplies per month)

                                = 3,470 - (58 x 49 + 2,460) = - $1,832 (Favourable).